Value at Risk for Large Portfolios

Abstract

We argue that the practise of valuing the portfolio is important for the calculation of the V aR. In particular, the seller (buyer) of an asset does not face horizontal demand (supply) curves. We propose a partially new approach for incorporating this fact in the V aR and in an empirical illustration we compare it to a competing approach. We find substantial differences.Demand; Supply; Liquidity Risk; Limit Order Book; Bank; Sweden